U.S. maintained a leadership role in international monetary management because there was economic and political crisis in the world. Because of the war's damage, developing countries needed US aid to reform their local production finance, their international trade and supply stability.
After 1947, the US commenced to manage the international monetary system and to do this supplied liquidity and adjustments. In 1947, gold and the pound could not keep on serving as the world's money. Gold could not meet the needs of international trade and investment. Pound was no longer able to serve as the primary world currency because British economy was weak. Just the dollar was able to meet the increasing needs. Because of the importance of the dollar, US began to be central banker of the world.
Purpose of the WTO is to support free trade and growth of economy. The implementations of WTO have many criticisms. The critics are for broadening the gap between rich and poor.
Was it necessary to found the World Trade Organization?
The WTO worked mainly for the benefits of the U.S. In 1948, U.S. did not want International Trade Organization (ITO) to be found, because this would not work for its benefits of economic dominance. Therefore U.S. was founding father of WTO in 1980s, because US thought that it was enough to compete in global market.
The international trading regime was shaped by Washington interests. There was not a global need for WTO in 1995. WTO that is powerful was wanted by US because its demands were not meet by GATT anymore. WTO is planned for the global dominance of America. It tries to institutionalize the benefits of US organizations[1].
US wanted to provide services at the range of WTO, with its assessment that in the new new area of international services, and in financial services, its corporations had a lead protection. The US pushed to widen WTO mission to the 'Trade-Related Investment Measures' and 'Trade-Related Intellectual Property Rights‘. Also elimination of barriers to the system of internal cross-border trade of product parts among transnational establishments subsidiaries. Developing countries imposed the subsidiaries for improving their industries; also securing the US advantage in the cutting-edge knowledge-intensive industries was the other aim.
The US forced the creation of the WTO's hard dispute-resolution and enforcement mechanism after being ruined with US trade officials consideration as inadequate GATT efforts.
About the developing countries;
With the Uruguay Round negotiations, enthusiasm for the process by the developing countries was not enough because of the Marrakesh Accord of 1994. With this accord the Uruguay Round was approved and the WTO was established. They as minority, expect that they would gain greater market access to their exports.
US propagandists caused huge fear for selling the WTO to the South. The fear was stemmed from staying out of the WTO would result in a country's isolation from world trade. After that giving the promise of 'rules-based system' of world trade would protect the weak countries from unilateral acts by the big trading powers was enough.
The US high-tech industry become successful by the Trade-Related Intellectual Property Rights agreement. It was successful about lobbying for stronger controls over the spread of innovations. The United States' influence was huge for the step of technological and industrial development in enemy industrialized countries, the NICs, and the Third World.
For quantifying the success of the WTO, looking at the volume of world trade will be enough. World trade increased 25% in the last four years, and all the benefits of increased trade are not shared[2].
WTO's agenda, exercising its agreements, and the system of dispute settlement together contribute to the advance of the interests of developed countries.In the world trade system, least developed countries (LDCs) are alienated and commodities of these LDCs face tariff escalations.Rules that applied to WTO members on an equal basis have caused disequilibrium because of divergent economic situations of each member.
In 1995, General Agreement on Tariffs and Trade (GATT) was replaced by World Trade Organization (WTO). In comparison to GATT, it can be said that the WTO has much more power because of its institutional foundation and its system of dispute settlement. Countries which don't comply with WTO trade rules are taken to court and they can ultimately face reprisal.
Economic actions and trade should be conducted with a view that would provide full employment, increase the standards of living, and ensure a big and growing real income, according to the GATT preamble(1947). In Marrakesh Agreement which established the WTO, these purposes were supported. Historically, GATT introduced tariff reductions all over the world. Before the Uruguay Round, which ended in 1994, the trade negotiations concentrated upon the nonagricultural goods. It is especially because of purpose of U.S. about protecting its farm sector. With the increase of the common interests of the developed countries, these countries have also met for more issues to be incorporated into the GATT/WTO. Now, its agenda involves agriculture, services such as telecommunications and information technology, intellectual property rights, electronic commerce[3].
Amendments of rules occur mainly because of multilateral negotiations named "rounds." In every rounds, a package approach to trade negotiations was submitted, many issues are argued together there and tradeoffs between divergent issues are made. There are negotiations about single issues between the rounds.
WTO now has 132 members and there are another 31 in the process of accession. Among 132 members, 98 members are developing countries, including 27 nations classified as the least developed countries (LDCs)[4].
One of the criteria to evaluate the success of the WTO is the world trade volume. The results in this respect are perfect because of world trade up 25 percent in the last four years. However the advantages of increased trade are not broadly shared. For instance, the LDCs that constitute 20 percent of the world's population create only 0.03 percent of the trade flows.
Although seen as a democratic institution, the WTO is controlled by the leading industrialized countries and by these countries' organizations. WTO is encircled by the reason of commercial trade. The development targets which were articulated when GATT was first formed have been suspended or they are wrongly supposed to be the natural result of increased trade. The following reasons shows that why developing countries have little power within the WTO outline:
Developing countries constitute three-fourths of membership of WTO and they can (in theory) affect the agenda and consequence of trade negotiations by their voting power, however they don't have used this to their own benefits. Most developing country economies generally depends on the U.S., the EU, or Japan from the points of imports, exports, aid etc. Any obstacle to a consensus at the WTO can threaten the welfare and security of dissenting developing nations.
Negotiations on trade are based on the reciprocity principle or tradeoffs. It means that a country gives a concession in one area, such as reducing the tariffs for a particular product, on condition that the other country accepting to a particular agreement. That kind of barter benefits the large and divergent economies, since the countries can get more by giving more. Negotiations and tradeoffs generally occur among the developed countries and some of the bigger or wealthier developing countries.
Developing countries don't have too many human and technical sources. Many of these countries can't cope with almost 40-50 meetings which held in Geneva every week. Accordingly, they generally enter negotiations less prepared than developed countries[5].
Developing countries have noticed that pursuit of recourse in the system of dispute settlement is costly and necessitates a level of legal proficiency that they may not have. Additionally, the foundation on which the system is run (whether a country is violating the rules of free trade) is not the most suitable for their development necessities.
At the Uruguay Round, Nelson Mandela said that the developing countries had not been able to provide that the rules accommodated their realities and it had been basically the troubles of the advanced industrial economies that formalized the agreement. In addition, he said that rules applied on an equal basis were not necessarily fair because of the members' disparate situations.
Main Problems about Current U.S. Policy
Washington has supported the guideline of free trade only in some sectors which benefit the U.S. economy; in other sectors such as textiles protectionism prevails. Agricultural and patenting policies of the U.S. will not supply the need of food for an increasing world population.
More deregulation in some issues will provide Northern organizations more access to the resources of the South, so that more debilitating the domestic economies of developing countries.
U.S. effect on the WTO has actually more often meant U.S. supremacy than responsible leadership. U.S. is more generally involved in aggressively broadening its own markets, instead of supporting profitable targets for all. It looks out for its own interests and pursues a corporate-driven menu of liberalization that marginalizes the development necessities of the poor, as much as internal politics allow. According to Martin Khor of the Third World Network the U.S. agenda is liberalization if it provides benefits to it, protectionism if it provides benefits to it, what counts is its trading interest.
The injustices within the WTO are stark. Exports from developing countries keep on facing important market access obstacles. Recent studies of UN shows that tariff peaks and tariff escalation still prevent exports of developing countries and their efforts to export new commodities such as beef, cigarettes, clothing, and wood articles.
The developed countries acting according to the interests of transnational corporations (TNCs) have quickly applied new agreements in telecommunications, information technology, and financial services to get new market access in developing countries. The Millennium Round talks which planned to start in 1999 will enhance economic liberalization in traditional sectors and new sectors even further, alien to the benefits of developing countries.
Washington defended that WTO protect industries. Although the U.S. opened few markets, this liberalization was not very beneficial to developing nations. US also introduced its own rules to identify where a textile or clothing product comes from, but the conditions of competition changed and the restrictions against the low-cost textile exports of other countries attached.
US changed its policies to comply with its commitments under the agreement by using some calculations and interpretations of the Agreement on Agriculture for reducing domestic support and open up markets, but these changes were insignificant. So, the agreement institutionalizes aids to U.S. exporters who export agricultural product, but at that time they forbid developing country governments to present new forms of support for their disadvantaged farmers. The 1996 Farm Bill declined direct payments to U.S. farmers, but it increased expenditure for export subsidies, and especially a net benefit came to U.S. exporters.
WTO agricultural policies which directed by U.S does not satisfy the food needs of a growing world population. These policies improved food availability through trade and did not encourage countries from developing food self-sufficiency. Most of the developing countries are lack of foreign exchange and fall short of food from the world market.
New rules were made about plant information for agriculture and medical implications. The Trade Related Intellectual Property Rights Agreement (TRIPS) aims to protect the rights of establishments however it also permits the shared knowledge of local communities to be patented by others. If it implemented absolutely, developing countries will lose billions while rich countries getting richer.
TRIPS derive the U.S. biotechnology industry with a very advanced environment. But this was not enough to make solutions for food shortages. Genetically modified seeds and plants increased costs for farmers, the effect of diseases and pests, the use of chemicals, and threaten the genetic chastity of plant species. And also, while the U.S. has not done long-term research on the health impact of genetically modified seeds; other countries are unable to stop their imports if they can not introduce scientific proof of harmful effects.
At the Millennium Round talks, Washington tried to present a wide spectrum of issues aiming to extend the market for U.S. goods, services, and investments. High on the agenda will be the debatably Multilateral Agreement on Investment, and it wants to gain national treatment and rights for corporations operating in all countries. Small- and medium-sized enterprises in developing countries can't resist on such competition, this competition will cause the destruction of domestic economies in the LDCs.
The Third Ministerial Conference with Washington tries to finish a main agreement on transparency in government procurement. This agreement would definitely carry with the full-scale opening of government procurement--a trillion dollar business--to foreign companies. This can be damaging for developing countries, because their enterprises will not be ready for such excessive competition. Washington could not recognize that these liberalization policies do not promote the sustainable international development that it claims to support.
Recommendations about a new policy
The WTO should consider its top priority to be the development needs of its members.Development needs of members should be taken as the most important issue by WTO. Sections of agreements that work to the disadvantage of developing countries must be changed, including agriculture, TRIPS, textiles, and the dispute settlement system.
Some parts of agreements which are about agriculture, trips, and textiles are against developing countries and must be changed.U.S. domination should end, decisionmaking should be democratic, and each government should consult regularly with its broader society on trade deliberations.Settlements must be taken on a more democratic platform and especially US's rights should be equalized with the rest.
A new idea of total development should be considered to grow the standards of poor instead of trade makes wealth. WTO should pay attention on being independed and self-sufficient in economy.Domestic markets should be preferred instead of foreign for development. National and local communities should be supported. Countries may choose overseas investments and types of it. And to protect inner industry they can determine some limitations and rates for foreign investments as most of grown countries do.
The US has a very important role on making WTO more democratic institution. This democratization causes a variety in economic interests. Politicians must consult their communities about negotiation's conditions. US should force WTO to make the meetings and documents open and people. The system must be changed to allow well-organized civil societies to be a part of taking decisions and intercede in incompabilities.
WTO must change some rules to add the realities and broader order of the Southern members, including the following:
Technical expertise and human resources should be implemented in members to attend completely in the multilateral negotiations. The speed of liberalization should be slow down. In place of this the amendments should be implemented on to rules that effectually disadvantage the economies of developing countries. The right to make decision should be given to all the members in the WTO.
The system should consider all the needs for development of countries. Because both the developed and developing countries involve in the same market, the aids should be given equally. Unless this is provided, the conditions to compete would not be equal for developing and developed countries in the market. In developed and developed countries, small farms should be bolstered, not squeezed out. In developing countries notably, farming is the source of living for many people.
TRIPS which are in behalf of the U.S should be removed and this control of property rights should go back the pre situation that supported by World Intellectual Property Organization. At least some regulations should be remove from the control of TRIPS.
Developed countries should riddle the tariff escalation on commodity bonds of interest to developing countries. And if the WTO keeps on forcing all countries towards the liberalization way, the protected sectors in the U.S. should be liberalized to open up new export markets for developing countries
NORTH-SOUTH TRADE ISSUES:
Many industrialized advanced state tried to adopt the developing states to international trade system make many deliberation about this issue in Uruguay Round. It is clearly implies that less developed nations are important factors for international trade system. Less developed countries make a leap in terms of economic development with manufactured goods after the World War II. Multinational Corporations (MNCs) had established in many less developed nations in order to increase manufactured goods and so these countries with the help of MNCs, tried to adopt liberal economic system.
But the less developed countries perspective implies that liberal economic system can only provide benefit for richer countries and less developed countries are damaged because of large trade deficits. They charged richer countries to become twofaced. Because liberal economic system has only promoted the advance countries economies. For this reason, GATT and WTO's policies and their system are only convenient for richer Northern industrialized countries.
Less developed countries think that advance countries tried to adopt the less developed countries into GATT or WTO policies in order to handle the Third World export market and their raw materials. Advance countries have the information of know-how and technology of products but they don't teach less developed countries this know-how information and caused the maintenance backwardness of less developed nations.
Many WTO agreements were signed between less developed and advance nations in order to reach some standardization and to ensure the benefit of the less developed nations. WTO presents some presumable trade orders and tries to create transparency for less developed countries to reach international markets. For this reason, less developed regions become more willing to have foreign direct investment in order to reach more international markets.
According to WTO supporters, if south countries make economic reforms, they will provide benefit from international liberal trade system. This implies that the economic gap between North and South will be gradually decreasing.
According to structuralists, WTOs' provisions and policies for less developed nations in Uruguay Round eliminated the interdependence of North and South.
REFERENCES
§ Arvind Panagariya, “The Millennium Round and Developing Countries: Negotiating Strategies and Areas of Benefits”, UN Research papers for the Intergovernmental Group of Twenty-Four on International Monetary Affairs, New York and Geneva: March 2000
§ David N. Balaam,Micheal Veseth , “Introduction to International Political Economy”, Prentice Hall, 2nd edition New Jersey :2001
§ Gregory Shaffer , ”The Challenges of WTO Law: Strategies for Developing Country Adaptation” , World Trade Review, July 2006
§ Karaca, Nil ,"Gatt'tan Dünya Ticaret Örgütü'ne”,Maliye Dergisi, sayı 144, (Eylül-Aralık 2003), pp. 84-99
§ Aileen Kwa, WTO and developing countries, Focus on the Global South (Bankok), (Vol.3 no. 37, November 1998)
§ Walden Bello,Why Reform of the WTO is the Wrong Agenda, (Focus on the Global South, Bangkok, February 2000)
§ David N. Balaam, Michael Veseth, Introduction to International Political Economy, (New Jersey, Prentice Hall, 2nd edition, 2001) pp: 110-131
§ http://www.wto.org/english/thewto_e/whatis_e/tif_e/dev1_e.htm
§ http://www1.voanews.com/turkish/news/a-17-2006-02-13-voa14-88029632.html?moddate=2006-02-13
§ “Dünya Ticaret Örgütü (DTÖ) Gelişmeler”, TUSIAD Türk Sanayicileri ve İşadamları Derneği, volume 4, July, 2008
§ Ali Turhan, “Dünya Ticaret Örgütü (WTO)”, 1997, p.1
§ Ahmet Şahinöz, “Dünya Ticaret Örgütü'nün Dönüşümü”, Hacettepe University, p.2
[1] Walden Bello,Why Reform of the WTO is the Wrong Agenda, (Focus on the Global South, Bangkok, February 2000), p.1-9
[2] Ibid, p.19
[3] Aileen Kwa, WTO and developing countries, Focus on the Global South (Bankok), (Vol.3 no. 37, November 1998)
[4] Ibid
[5] Ibid.
[6] Ibid
[7] David N. Balaam, Michael Veseth, Introduction to International Political Economy, (New Jersey, Prentice Hall, 2nd edition, 2001) pp: 110-131
